Review of Accounting Studies

, Volume 23, Issue 2, pp 385–421 | Cite as

Equity cross-listings in the U.S. and the price of debt

  • Ryan T. BallEmail author
  • Luzi Hail
  • Florin P. Vasvari


Using a large panel from 46 countries over 20 years, we find that non-U.S. firms issue corporate bonds more frequently and at lower offering yields following an equity cross-listing on a U.S. exchange. Firms issue more bonds through public offerings instead of private placements and in foreign markets rather than at home, in both cases at significantly lower yields. Moreover, the debt-related benefits are concentrated among firms domiciled in countries with less private benefits of control, efficient debt enforcement, and developed bond markets, suggesting that equity cross-listings cannot completely offset the impact of weak home country institutions. The results support the notion that the monitoring, transparency, and visibility benefits brought about by equity cross-listings on U.S. exchanges are valuable to bond investors.


Corporate governance Bonding hypothesis Debt financing Disclosure Law and finance International accounting 

JEL classifications

F34 G12 G15 G38 K22 



We thank an anonymous referee, Anne Beatty, Phil Berger, Maria Correia, Günther Gebhardt, Wayne Guay, Bob Holthausen, Scott Liao, Russ Lundholm (editor), Oguzhan Ozbas, Doug Skinner, René Stulz, and workshop participants at the 2009 Global Issues in Accounting Conference, 2009 INTACCT international workshop in Porto, 2009 Verein für Socialpolitik Accounting Section meeting, 2009 Conference on Empirical Legal Studies, 2010 European Financial Management Association meeting, 2011 European Accounting Association meeting, University of Chicago, Erasmus University, Goethe University, INSEAD, New York University, Ohio State University, University of Pennsylvania, University of Rochester, Stanford University, and University of Texas at Austin for helpful comments. Ryan Ball gratefully acknowledges the financial support of the Ernst & Young Faculty Fellowship. Florin Vasvari gratefully acknowledges the financial support of the London Business School RAMD Fund.


  1. Altman, E. (1968). Financial ratios, discriminant analysis, and the prediction of corporate bankruptcy. Journal of Finance, 23, 589–609.CrossRefGoogle Scholar
  2. Ammer, J., Holland, S., Smith, D., & Warnock, F. (2012). U.S. international equity investment. Journal of Accounting Research, 50, 1109–1139.CrossRefGoogle Scholar
  3. Andrade, S., Bernile, G., & Hood, F. (2014). SOX, corporate transparency, and the cost of debt. Journal of Banking and Finance, 38, 145–165.CrossRefGoogle Scholar
  4. Baruch, S., Karolyi, G. A., & Lemmon, M. (2007). Multi-market trading and liquidity: Theory and evidence. Journal of Finance, 62, 2169–2200.CrossRefGoogle Scholar
  5. Beatty, A., Weber, J., & Yu, J. (2008). Conservatism and debt. Journal of Accounting and Economics, 45, 154–174.CrossRefGoogle Scholar
  6. Bharath, S., Sunder, J., & Sunder, S. (2008). Accounting quality and debt contracting. The Accounting Review, 83, 1–28.CrossRefGoogle Scholar
  7. Boubakri, N., Cosset, J., & Samet, A. (2013). International cross-listings and subsequent security-market choices: Evidence from ADRs. Financial Review, 48, 311–341.CrossRefGoogle Scholar
  8. Cantillo, M., & Wright, J. (2000). How do firms choose their lenders? An empirical investigation. Review of Financial Studies, 13, 155–189.CrossRefGoogle Scholar
  9. Chen, L., Lesmond, D., & Wei, J. (2007). Corporate yield spreads and bond liquidity. Journal of Finance, 62, 119–149.CrossRefGoogle Scholar
  10. Coates, J., & Srinivasan, S. (2014). SOX after ten years. Accounting Horizons, 28, 627–671.CrossRefGoogle Scholar
  11. Coffee, J. (1999). The future as history: The prospects for global convergence in corporate governance and its implications. Northwestern University Law Review, 93, 641–707.Google Scholar
  12. Coffee, J. (2002). Racing towards the top? The impact of cross-listings and stock market competition on international corporate governance. Columbia Law Review, 102, 1757–1831.CrossRefGoogle Scholar
  13. Diamond, D. (1984). Financial intermediation and delegated monitoring. Review of Economic Studies, 51, 393–414.CrossRefGoogle Scholar
  14. Diamond, D. (1991). Monitoring and reputation: The choice between bank loans and directly placed debt. Journal of Political Economy, 99, 689–721.CrossRefGoogle Scholar
  15. Djankov, S., La Porta, R., Lopez-de-Silanes, F., & Shleifer, A. (2008). The law and economics of self-dealing. Journal of Financial Economics, 88, 430–465.CrossRefGoogle Scholar
  16. Doidge, C., Karolyi, G. A., & Stulz, R. (2004). Why are foreign firms listed in the U.S. worth more? Journal of Financial Economics, 71, 205–238.CrossRefGoogle Scholar
  17. Doidge, C., Karolyi, G. A., & Stulz, R. (2009). Has New York become less competitive than London in global markets? Evaluating foreign listing choices over time. Journal of Financial Economics, 91, 253–277.CrossRefGoogle Scholar
  18. Doidge, C., Karolyi, G. A., & Stulz, R. (2010). Why do foreign firms leave U.S. equity markets? Journal of Finance, 65, 1507–1553.CrossRefGoogle Scholar
  19. Dyck, A., & Zingales, L. (2004). Private benefits of control: An international comparison. Journal of Finance, 59, 537–600.CrossRefGoogle Scholar
  20. Errunza, V., & Miller, D. (2000). Market segmentation and the cost of capital in international equity markets. Journal of Financial and Quantitative Analysis, 35, 577–600.CrossRefGoogle Scholar
  21. Fama, E. (1985). What’s different about banks? Journal of Monetary Economics, 15, 29–39.CrossRefGoogle Scholar
  22. Fan, J., Titman, S., & Twite, G. (2012). An international comparison of capital structure and debt maturity choices. Journal of Financial and Quantitative Analysis, 47, 23–56.CrossRefGoogle Scholar
  23. Florou, A., & Kosi, U. (2015). Does mandatory IFRS adoption facilitate debt financing? Review of Accounting Studies, 20, 1407–1456.CrossRefGoogle Scholar
  24. Foerster, S., & Karolyi, G. A. (1999). The effects of market segmentation and investor recognition on asset prices: Evidence from foreign stocks listing in the U.S. Journal of Finance, 54, 981–1013.CrossRefGoogle Scholar
  25. Francis, J., Khurana, I., & Pereira, R. (2005). Disclosure incentives and effects on cost of capital around the world. The Accounting Review, 80, 1125–1162.CrossRefGoogle Scholar
  26. Ghosh, A., & Jain, P. (2000). Financial leverage changes associated with corporate mergers. Journal of Corporate Finance, 6, 377–402.CrossRefGoogle Scholar
  27. Gigler, F., Kanodia, C., Sapra, H., & Venugopalan, R. (2009). Accounting conservatism and the efficiency of debt contracts. Journal of Accounting Research, 47, 767–797.CrossRefGoogle Scholar
  28. Hail, L., & Leuz, C. (2009). Cost of capital effects and changes in growth expectations around U.S. cross-listings. Journal of Financial Economics, 93, 428–454.CrossRefGoogle Scholar
  29. Hart, O. (1995). Firms, contracts, and financial structure. Oxford: Clarendon Press.CrossRefGoogle Scholar
  30. Harvey, C., Lins, K., & Roper, A. (2004). The effect of capital structure when expected agency costs are extreme. Journal of Financial Economics, 74, 3–30.CrossRefGoogle Scholar
  31. Henderson, B., Jegadeesh, N., & Weisbach, M. (2006). World markets for raising new capital. Journal of Financial Economics, 82, 63–101.CrossRefGoogle Scholar
  32. Hoshi, T., Kashyap, A., & Scharfstein, D. (1993). The choice between public and private debt: An analysis of post-deregulation corporate financing in Japan. NBER: Working paper.CrossRefGoogle Scholar
  33. Houston, J., & James, C. (1996). Bank information monopolies and the mix of private and public debt claims. Journal of Finance, 51, 1863–1889.CrossRefGoogle Scholar
  34. Ivashina, V., & Sun, Z. (2011). Institutional stock trading on loan market information. Journal of Financial Economics, 100, 284–303.CrossRefGoogle Scholar
  35. Jensen, M., & Meckling, W. (1976). Theory of the firm: Managerial behavior, agency costs, and capital structure. Journal of Financial Economics, 3, 305–360.CrossRefGoogle Scholar
  36. Karolyi, G. A. (1998). Why do companies list shares abroad? A survey of the evidence and its managerial implications. Financial Markets, Institutions and Instruments, 7, 1–60.CrossRefGoogle Scholar
  37. Karolyi, G. A. (2006). The world of cross-listings and cross-listings of the world: Challenging conventional wisdom. Review of Finance, 10, 99–152.CrossRefGoogle Scholar
  38. Khurana, I., Martin, X., & Pereira, R. (2008). Firm growth and cross listing. Review of Finance, 12, 293–322.CrossRefGoogle Scholar
  39. Kim, H., & McConnell, J. (1977). Corporate mergers and co-insurance of corporate debt. Journal of Finance, 32, 349–363.CrossRefGoogle Scholar
  40. King, M., & Segal, D. (2009). The long-term effects of cross-listing, investor recognition, and ownership structure on valuation. Review of Financial Studies, 22, 2393–2421.CrossRefGoogle Scholar
  41. Kwan, S., & Carleton, W. (2010). Financial contracting and the choice between private placement and publicly offered bonds. Journal of Money, Credit and Banking, 42, 907–929.CrossRefGoogle Scholar
  42. La Porta, R., Lopez-de-Silanes, F., Shleifer, A., & Vishny, R. (1997). Legal determinants of external finance. Journal of Finance, 52, 1131–1150.CrossRefGoogle Scholar
  43. Lang, M., Lins, K., & Miller, D. (2003). ADRs, analysts, and accuracy: Does cross listing in the United States improve a firm’s information environment and increase market value? Journal of Accounting Research, 41, 317–345.CrossRefGoogle Scholar
  44. Leftwich, R. (1983). Accounting information in private markets: Evidence from private lending agreements. The Accounting Review, 58, 23–42.Google Scholar
  45. Leland, H., & Pyle, D. (1977). Informational asymmetries, financial structure, and financial intermediation. Journal of Finance, 32, 371–387.CrossRefGoogle Scholar
  46. Licht, A. (2003). Cross-listing and corporate governance: Bonding or avoiding? Chicago Journal of International Law, 4, 141–163.Google Scholar
  47. Lins, K., Strickland, D., & Zenner, M. (2005). Do non-U.S. firms issue equity on U.S. stock exchanges to relax capital constraints? Journal of Financial and Quantitative Analysis, 40, 109–133.CrossRefGoogle Scholar
  48. Merton, R. (1987). A simple model of capital market equilibrium with incomplete information. Journal of Finance, 42, 483–510.CrossRefGoogle Scholar
  49. Miller, D., & Puthenpurackal, J. (2002). The costs, wealth effects, and determinants of international capital raising: Evidence from public Yankee bonds. Journal of Financial Intermediation, 11, 455–485.CrossRefGoogle Scholar
  50. Miller, D., & Reisel, N. (2012). Do country-level investor protections affect security-level contract design? Evidence from foreign bond covenants. Review of Financial Studies, 25, 408–438.CrossRefGoogle Scholar
  51. Myers, S. (1977). Determinants of corporate borrowing. Journal of Financial Economics, 5, 147–175.CrossRefGoogle Scholar
  52. Pagano, M., Röell, A., & Zechner, J. (2002). The geography of equity listing: Why do companies list abroad? Journal of Finance, 57, 2651–2694.CrossRefGoogle Scholar
  53. Qi, Y., Roth, L., & Wald, J. (2010). Political rights and the cost of debt. Journal of Financial Economics, 95, 202–226.CrossRefGoogle Scholar
  54. Qi, Y., Roth, L., & Wald, J. (2011). How legal environments affect the use of bond covenants. Journal of International Business Studies, 42, 235–262.CrossRefGoogle Scholar
  55. Qian, J., & Strahan, P. (2007). How laws and institutions shape financial contracts: The case of bank loans. Journal of Finance, 62, 2803–2834.CrossRefGoogle Scholar
  56. Rajan, R., & Zingales, L. (1995). What do we know about capital structure? Some evidence from international data. Journal of Finance, 50, 1421–1460.CrossRefGoogle Scholar
  57. Reese, W., & Weisbach, M. (2002). Protection of minority shareholder interests, cross-listings in the United States, and subsequent equity offerings. Journal of Financial Economics, 66, 65–104.CrossRefGoogle Scholar
  58. Siegel, J. (2005). Can foreign firms bond themselves effectively by renting U.S. securities laws? Journal of Financial Economics, 75, 319–359.CrossRefGoogle Scholar
  59. Stulz, R. (1981). A model of international asset pricing. Journal of Financial Economics, 9, 383–406.CrossRefGoogle Scholar
  60. Stulz, R. (1999). Globalization, corporate finance, and the cost of capital. Journal of Applied Corporate Finance, 12, 8–25.CrossRefGoogle Scholar

Copyright information

© Springer Science+Business Media, LLC 2017

Authors and Affiliations

  1. 1.Ross School of BusinessUniversity of MichiganAnn ArborUSA
  2. 2.The Wharton SchoolUniversity of PennsylvaniaPhiladelphiaUSA
  3. 3.London Business SchoolLondonUK

Personalised recommendations